Keynote intelligence, innovation & best practicePresentation Transcript
Intelligence, Innovation & Best Practice How organisations are driving growth and profitability Phil Ruthven, Chairman WHERE KNOWLEDGE IS POWER
Topics 1. A New Age Business 2. The Intelligent Organisation Innovation & Productivity Keys To Success Snapshots Of A Changing World
1. A New Age Business
Expectations of a New Age business Profitability and growth A return on shareholder funds after tax of 4 times the bond rate Growth better than the industry average ( + international?) Uniqueness in: Product, IP and operations Organisational culture World best practice in: Value for money for customers Respect for the society in which it operates Relations with other stakeholders Treatment of the natural environment
Australasian Profitability by Cohorts Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009 23% > World Best Practice (ROSF 22.2%) 42% > Average (ROSF 12.6%) 68% > Bond Rate (5.4%) 11% Losses -10.5 -128.0 Percent Source: IBISWorld 19/11/09
ProfitabilityBy Major Industries Return on Shareholder Funds (after tax), Top 1250 businesses 5 years to F2009 0.4 6.4 Percent Source: IBISWorld 22/12/09
Intellectual Property Intellectual property can best be described as a “cocktail” of:
vision, plans and documented achievable strategies.
It is the "holy grail" of a enterprise, its core and its most valuable balance sheet asset, whether recorded as such in dollar terms or not.
Unique Organisational Culture A unique culture is about attracting and keeping good people to your business, and helping develop ordinary people into extraordinary people. This is built on a base of world best practice principles of human resources management. But a unique culture goes well beyond the basics: it needs to have special elements of both a tangible and intangible nature. No matter how often we say it, employees are not a firm’s most valuable asset, since slavery has been outlawed for some considerable time! But in the emerging “sellers market” we need them to stay.
How much do weneed to know about . .. The Influential Environments (4) 1. The world environment,growth, regions, nations, demography etc. ? 2. National resources,developed (infrastructure, IC&T), natural (resources, ecology)? 3. Our community,its changing demography, lifestyles and spending ? 4. The economic environment,the “business weather” conditions? The Operating Environments (6) 5. The government environment,laws, taxes, policies, incentives? 6. The finance market,equity, debt, exchange/interest rates, treasury ? 7. The services market,to outsource none-core activities and functions ? 8. The labour market,for executives, employees and customers? 9. The purchases market,raw materials, semi-/finished goods, prices ? 10. Its market,local and global? The Immediate Environment Our own industry, WBP, size, growth & disposition, competitors? OurOwn Business Its IP, financials, sales, operations, TQC, productivity, R&D, HR etc. ?
In the Industrial Age businesses generally planned and operated on an inside-outbasis. The external business environments were largely opaque to an enterprise which tended to be fortress style; and enterprises were opaque to outsiders who saw enterprises as secretive. In the New Age businesses must now forecast, plan and operate on an outside-in basis. The business environments are becoming transparent to enterprises, and in turn the enterprises are becoming more transparent to outsiders.
Business IntelligenceExpenditure on data and information,F2010(E) Internally Sourced 64.5% Sales analysis Personnel Operational analyses etc. 35.5% Externally Sourced R&D, Innovation Finance & Accounts IBISWorld 17/11/09
Nearly two thirds of all business data, information and intelligence in Australia in F2010 will be internally generated.How much value-adding do we do with this, to help with planning, efficiency, revenue growth, CRM and profitability?
Over one third of all spending on data, information and intelligence by enterprises in F2010 will be outsourced.This proportion has been steadily increasing from less than 10% half a century ago to an estimated 35.5% this year.We are spending more on information and also outsourcing more of it.
Type Of Outsourced Business Information Australia F2010(F) Exploratory News/ Books/ Mags. 1.2% Scientific Research Online Info 2.0% ISPs 1.7% Data Process 1.5% Mkt. Research 1.3% Other1 Conferences/ Meetings2 2.2% 3.1% 5.8% Cons. Eng. + Architects Data/Inform. 6.5% 26.2% Associations 6.7% Env. Serv. 7.7% Accounting Services 20.3% Mgt. Consulting Legal Services 9.7% 10.6% Note: 1 Public Relations Credit Agencies 0.9% Other 0.7% ` 2 Includes accommodation, travel, registration fees, speakers etc IBISWorld 18/11/09
Purpose Of Outsourced InformationAbout What?F2010 (F) Exploratory Government 1.0% World 0.8% Services 0.5% Resources 0.5% Community1.5% Labour 2.0% Economy2.5% Purchases 2.9% Finance 3.0% Market4.0% Own Industry 9.8% 71.6%AboutOur Own Company1 From Accounting firms, Legal firms, Management Consultants, Consulting Engineers etc Spending on information about the external environment ($19.5 billion) is 28% of all outsourced spending and 10% of all spending IBISWorld 17/11/09
Of all the business spending on data, information and intelligence - $195 billion - only 10%is spent on issues in the external environment. But this spending is growing nearly 2% pa faster than the economy in response to the need to plan on an outside-in basis, displacing the old inside-out approach of the secretive Industrial Age?
The Imperative of Going Up The Information Chain
The Knowledge Pyramid By Value By Volume Vision & Strategy Vision Vision Expert Opinion Unique IP Unique IP Decreasing Value Wisdom Wisdom Expert Opinion Expert Opinion Intelligence Intelligence Increasing Value Information Information Data Data Hearsay But interesting! Hearsay, Rumour, Scuttlebut Source: IBISWorld 18/11/09
3.The Innovation & Productivity Imperative
Standard of Living 200820Highest NationsGDP/capita, ppp basis $US ‘000 (ppp) CIA FactBook/IBISWorld 20/10/09
Standard of Living 200821-40Highest NationsGDP/capita, ppp basis $US ‘000 (ppp) CIA FactBook/IBISWorld 20/10/09
Business Research & Development(% of GDP) World Best Practice: nations > 2.5% of GDP (eg. Sweden, Japan, Finland, S. Korea, USA) Australia 14th in 2008 among 30 OECD member. OECD BERD % of GDP Australia NZ (0.5%) Year, ended June Source: DIISR
Productivity Growth (Growth in GDP/ hour worked, % pa) Growth in GDP/hour worked (%) Australia New Zealand Year, ended June (Australia), March (NZ) Source: DIISR
4.Keys To Success
What the Best Enterprises Are Doing 1. They stick to one business at a time and do not diversify 2. They aim to dominate some segment (s) of their market 3. They are forever innovative,valuing the business’ IP. 4. They outsourcenon-core activities to enable growth. 5. They don’t own “hard” assets. 6. They havegood and professional financial management. 7. They plan from the outside-in not the inside-out 8. They anticipate any new industry lifecycle changes. 9. They follow world best practice for their own type of business. 10. They developstrategic alliances. 11. They develop unique organisational cultures. 12. They valueleadership first and management second.
Positioning Secure a safe industry position in your chosen industry to be master-of one’s-own-destiny by dominating something. Domination can be of: the whole industry class (being a major); or one category in the industry (a niche player); or one product group1 (an ultra-niche player); or one product ( a boutique operator). Note: 1 Or a customer segment; and occasionally a geographic area
Industry Share Strategy(positioning for a winnable war) No-man’s-land (un-winnableposition) Caught between nichers (“knee-cappers”) and ultra-niche players (“ankle-biters”) Ultra-niche specialist (1%) Niche Player Exotic/boutique operator (0.1%) 1-5 % 5% No-man’s-land Major Player 25-75% 5-25% No-man’s-land (un-winnableposition) Caught between majors (“sledgehammers”) and niche players (“knee-cappers”) Source: IBISWorld
Outsourcing And A Virtual Corporation In the Industrial Age, corporations set out to be self-sufficient - apart from obvious sub-contracting - creating complex and multi-layered/multi-functional structures. In the New Age, all non-core/non-strategic activities areoutsourced1 to specialists in the interest of reduced complexity and to develop focus, lightness, flexibility and faster growth of the business: a virtual corporation. In 2005, over $450 billion of non-core activities are now outsourced by businesses (20% of revenue) 1 Outsourcing is not to be confused with subcontracting
Business Outsourcing in the New Age Trucking
Road transport industry.
Office, factory, hotel etc.
Laundry, work clothes.
Canteens, Dining Rooms
Payroll, Share Registers
Full contract accounting.
Computer services (IT outsourcing)
Advertising, media buying
Warehousing & Delivery
Information & Planning
Database services Strategic and Other Consulting
The New Age VirtualCorporation Traditional Structure New Structure Virtual Corporation Multi-layered Corporation Leader, Senate and Top Management Board, CEO and Top Management Head Office functions Mostly outsourced Implementers Middle Management No Longer Mostly outsourced Required Coordinators & Operatives Supervisors & Employees No Longer Required Mostly outsourced and /or franchised Functions provided back to company by firms in new (specialised) industries (e.g IT, personnel, legal, accounting, information, transport, cleaning etc.)
Leadership Leadership sits above management. It demands special attributes such as loneliness in ultimate decision making (after full consultation), often with no voting. And, sometimes, no consensus. It is non-gender specific. Leadership involves more external focus than internal: the opposite of management. Apart from listening to experts and confidantes, it involves communicating directly with major customers at least once a year.
What can happen with great leadership, and following the Keys To Success (or most of them) The Leighton Group was mid-sized not that long ago
Leighton Holdings Revenue & Profitability1Revenue excludes JV & associates share 1962 to F2009 Notes: 1Net profit after tax on S/F 2 Zero data are actually losses for those 3 years ROSF Revenue(A$ billion) ROSF % Trend Trend Revenue IBISWorld 30/03/10
World GDP GrowthReal growth (PPP), 1950-2011(F) Purchasing Power Parity (PPP) terms 2008 3.2% 2009 -2.5% 2.5% (F) 2.9% (F) Past 25 years 3.5% p.a 1950-1969 growth in US$ market terms IMF/Economist//IBISWorld: 30/03/10
World’s 30 Largest Economies2010 (F) Poland 1.0% S. Arabia 0.8% Argentina 0.8% Thailand 0.8% S. Africa 0.7% Egypt 0.6% Pakistan 0.6% Colombia 0.6% Malaysia 0.6% Belgium 0.5% Purchasing Power Parity (PPP) terms Rest of World (198 nations) 15.5% 21st – 30th Nations 7.2% 20.5% USA 11th – 20th Nations 14.8% 13.3% China Italy Brazil Japan Russia France Britain Germany India 2.5% 2.9% 3.0% 6.0% 3.1% 5.3% 3.1% 4.0% Mexico 2.1% Spain 1.9% Korea S 1.9% Canada 1.9% Indonesia 1.4% Turkey 1.3% Australia 1.2% 17th Iran 1.2% Taiwan 1.0% Netherlands 0.9% World’s 228 nations US$ 72.1 trillion CIA/IBISWorld 08/02/10
Economic Growth: 2009 (F)20 Largest Economies (ppp ranking) World Growth 2008, -2.5% The Economist/IBISWorld11/04/10
Economic Growth: 2010(F)20 Largest Economies (ppp ranking) World Growth 2010 (f), 2.5% The Economist/IBISWorld11/04/10
Economic Growth:ChinaReal growth1950-2011 (F) 8.2% average SSBC/IBISWorld: 24/03/10
Economic Growth: New ZealandAnnual real GDP growth (%) progressed in quarters to March 2010 Long Business Cycle, average 8 years Source: IBISWorld/NZ Stats. 08/04/10
New Zealand’s Industry MixShares of GDP in real terms Year to June2008 Person. Serv. 1.1% Cult & Rec.Serv. Mining 1.2% Hospitality (1.6%) Agriculture 5.8% 2.0% Utilities 1.7% Other 3.4% Health 5.0-% Educn. 3.8% 14.1%Manufacturing Govt. Adm. 4.6% 4.6%Construction O’Ship Dwells. 5.8% 7.8% W’Saling 14.1% Prop. & Bus. Services 6.1%Retailing 6.8% 4.8%Transpt. Finance & Ins. 6.1% Communicns. GDP $NZ 179.2 billion (current prices) ABS 5206-26 /IBISWorld 06/11/08
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